Bilateral Accidents with Intrinsically Interdependent Costs of Precaution

Dhammika Dharmapala and Sandra Hoffmann

The Journal of Legal Studies, 2005, vol. 34, issue 1, 239-272

Abstract: The standard economic model of bilateral precaution postulates that the care that is taken by injurers and victims affects only expected accident loss. This paper considers situations in which each party’s precaution also directly affects the other party’s cost of taking precaution. When this additional externality is introduced into a model of unilateral harm, none of the standard tort liability rule induce socially optimal behavior by both parties. Moreover, under a contributory negligence rule, the only equilibrium is in mixed strategies; this gives rise to the possibility of litigation in equilibrium. “Tortlike” liability rules that can induce socially optimal care by both parties are characterized. The model is then extended to consider the case of bilateral harm, in which all negligence-based tort rules lead to socially optimal care by both parties, as long as each can sue to recover its full accident losses.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://dx.doi.org/10.1086/425598 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Bilateral Accidents with Intrinsically Interdependent Costs of Precaution (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:34:y:2005:p:239-272

DOI: 10.1086/425598

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().